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NHS doctors have been banned from earning lucrative agency rates while moonlighting at other hospitals after it emerged five medics were paid more than £2 million a year between them.

The health service watchdog, NHS Improvement, last night also revealed that around 100 agency staff are earning more than £200,000 a year for covering staff shortages, while more than 500 doctors take home in excess of £150,000 a year.

Many of these are NHS employees taking advantage of a system which allows them to charge “rip-off” agency rates - in addition to their salary - when working shifts at a hospital that is not their main place of employment.

There are far too many agency staff making the most out of the lower tax rates paid via personal service companiesJim Mackey, Chief Executive, NHS Improvement

The regulator is now banning the practice and has said that any doctor providing shifts at their non-regular NHS hospital must be paid at a normal level through PAYE.

It comes ahead of a change in the law due to come into force this April which will ban doctors from avoiding income tax by being paid through personal service companies.

The moves form part of a 18-month campaign to cut down on the huge sums made by locum agencies exploiting shortfalls in full-time hospital staff.

It is hoped the drive will tackle spiralling overspends by the provider sector, which mainly comprises hospitals, which last year reached more than £2.45 billion.

NHS Improvement said that three quarters of trusts had been able to reduce their agency spending since last year, with 40 per cent managing to cut their bills by more than a quarter.

It means hospitals are forecast to have spent around £3 billion in this financial year on locums, compared to £3.7 billion in 2015/16.

Hospitals must declare their locum spend weeklyCredit:
PA

More than a fifth of the bill spent on medical locums is devoted to filling gaps in A&E staff rosters, where there are acute full-time staff shortages and increasing patient demand.

Jim Mackey, chief executive of NHS Improvement, said the changes would make it more attractive for doctors and nurses to become permanent NHS employees.

“These new rules will make sure most agency staff get paid and taxed in the same way as their NHS staff colleagues,” he said.

“We expect these new measures to take another big chunk out of excessive agency costs.

“There are far too many agency staff making the most out of the lower tax rates paid via personal service companies.”

NHS Improvement is now demanding that hospital bosses report the amount they pay to locum staff on a weekly basis.

The body will then publish the total number of shifts each trust has reported paying more than £120 per hour.

The watchdog believes the new measures will save up to 25 per cent of the hourly charge billed by an agency, although it acknowledged greater transparency was needed surrounding locums paid more than £150,000 a year and promised further proposals in the coming weeks.

A spokesman for the Department of Health said: “This Government was the first to stop staffing agencies ripping-off the NHS and our efforts are having real impact - saving £1 billion which can be better spent on patient care.

“However, we know there is more work to do.

“These measures will help to level the playing field for hardworking NHS staff and make sure the NHS gets the most out of every pound it spends.”